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Access to imported intermediates and intra‐firm wage inequality
Author(s) -
Ge Ying,
Fang Tony,
Jiang Yeheng
Publication year - 2019
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12793
Subject(s) - productivity , wage inequality , wage , economics , inequality , labour economics , wage dispersion , investment (military) , control (management) , monetary economics , efficiency wage , macroeconomics , mathematical analysis , mathematics , management , politics , political science , law
We use Chinese firm‐level data from the World Bank Investment Climate Survey to examine the link between importing intermediates and intra‐firm wage inequality. Our results show that intermediate input importers not only have a significant wage premium but also have a greater intra‐firm wage dispersion than non‐importing firms. This pattern is robust when we control for productivity and use trade costs as the instruments. We further investigate the mechanism of how importing intermediates might contribute to both inter‐firm and intra‐firm wage inequality. Our evidence is consistent with three important channels. First, imported intermediate inputs complement skilled labour. Second, intermediates importers are more likely to use performance pay. Third, imported inputs complement innovation and employee training.